Fitch Solutions forecast real GDP growth of 1.5% and 5.5% in 2021 and 2022, respectively, for Malaysia following the release of Q321 growth data showing a 3.6% q-o-q s.a. contraction.
‘We expect the economy to begin recovering from Q421, with activity likely to benefit from the lifting of most restrictions for fully vaccinated individuals since October 11.
“Growth will be driven mainly by private consumption and fixed investment in 2022, though downside risks still remain, in the form of a possible sharper slowdown in China and the emergence of another variant of interest causing a spike in infections. We at Fitch Solutions maintain our 2021 and 2022 real GDP forecasts at 1.5% and 5.5%, respectively, following the release of Q321 data showing that the economy contracted 3.6% on a q-o-q s.a. basis, tipping the country into a technical recession,” Fitch says in a media release today.
It says that it expects the technical recession to end in Q421, which should post positive growth on the back of broad-based lifting of restrictions for fully vaccinated individuals.
In addition to the Q421 recovery, the economy should be much more resilient against Covid-19 in 2022, given higher vaccination rates and the improved resistance among the population conferred by the severe wave of infections experienced in 2021, making disruptive lockdowns a much less likely prospect.
Domestic demand will likely see a strong recovery as a result, with private consumption, in particular, benefitting from the lifting of restrictions. Fixed investment meanwhile, will receive a further boost from the ongoing global chip shortage and government consumption will be supported by a highly expansionary budget.
Net exports should also contribute positively once more to headline growth, despite mixed risks.
With a second consecutive q-o-q s.a. contraction, the economy fell into a technical recession in the third quarter. Private consumption performed poorly in line with our expectations amid strict measures remaining in place for much of the quarter, subtracting 2.6 percentage points (pp) from headline growth.
